MIT & Boston Federal Reserve Look to Reveal Two Digital Dollar Pilots by July 2021
The Federal Reserve Bank of Boston and researchers from the Massachusetts Institute of Technology (MIT) are making giant strides in their digital dollar program, according to a Bloomberg report.
Boston Fed To Launch Digital Dollar Prototypes
Researchers from both institutions are reportedly preparing to launch prototypes of two central bank digital currencies (CBDCs) platforms as early as July 2021.
The prototypes would store, move, and settle digital dollar transactions providing ease and convenience for an already crypto-acclimatized population, says James Cunha of the Boston Fed.
Cunha, who declined to state whether any of the prototype platforms would be based on a distributed ledger technology (DLT), said that the financial agency would not delay making their research findings public. Cunha added,
“We think it’s important that we not wait for the policy debate because then we’ll be a year or so behind. This will take significant outreach to the industry and serious debate.”
Apex banks like the People’s Bank of China (PBoc) are reportedly ahead of the pack. The Asian giant, which has been steadily exploring CBDC use cases, has conducted pilot tests in 2021 and would likely see a more distributed approach in the coming year.
Other countries like the Latin American nation, the Commonwealth of the Bahamas, have launched a digital version of their fiat currency called the “Sand Dollar” in 2020.
European nations like the UK are currently researching the technology and monitoring economic impact while others like the Swiss have postponed the program till the following year.
Big Tech Looks To Cash In On CBDCs
But amid all the mixed reactions, CBDCs seems to have gained more fans in the rapidly-growing digital economy. Federal Reserve boss Jerome Powell admitted as much in a recent virtual conference featuring central banks worldwide. In his closing comments, Powell said CBDCs would not outrightly replace the more traditional dollars but would be integrated into the extant payment systems and other forms of money.
But even as the world is slowly coming to grasp what many has described as a “shaking up” of the financial system, some others think a digital dollar may be unnecessary.
In a statement to Congress, the American Bankers Association said that introducing a “Fedcoin” (another name for CBDCs in the US) could bring unintended consequences. To the body, these digital caricatures could threaten the banking system's stability, and there is no guarantee of it bringing about greater financial inclusion.
This position is one that most legacy financial institutions are taking- calling CBDCs a “costly solution” to a problem that does not exist. But digital payments companies like Visa and MasterCard are already on the treadmill to ensure their platforms get listed to provide these services.
Visa’s North America Chief Oliver Jenkyn said they are in conversations with regulatory agencies on how a potential CBDC would be designed. According to Jenkyn, these conversations would be backed by actions.
These actions were brought to the fore when VISA proposed that CBDC transactions could be validated without an internet connection in its whitepaper.
ViSA is not alone in the CBDC race, with embattled US blockchain firm Ripple Labs also launching a private version of its XRP Ledger (XRPL) protocol specifically for issuance and maintenance of CBDCs.